India must bolster its energy security by boosting domestic oil output over the medium term as geopolitical tensions in West Asia — which have resulted in the blockade of the Strait of Hormuz — may cause oil prices to cross the tipping point to trigger a global recession. The prospect of costlier oil is bad news for India, which imports 88% of its energy needs. To be sure, the ruling dispensation is seized of this imperative and is incentivising domestic producers and global giants for exploration and production (E&P) by enacting the Oilfields (Regulation and Development) Amendment Act, 2025.
The objective is to increase exploration acreage to 1 million square kilometres (sq km) by 2030. The eleventh round of the open acreage licensing policy (OALP) has been launched, which together with the earlier tenth round, opens up 262,817 sq km for exploration. Effective royalty rates on crude oil and gas have also been reduced.
Arresting Decadal Decline
Clearly India needs to go all in to boost domestic production to be resilient in coping with energy shocks. For starters, it is a strategic necessity to reverse the steady downtrend in domestic oil production since FY12, which has been happening due to obstructive regulations, high taxation, and declining output from maturing fields. There have been no major discoveries lately. India lacks the technological capability for deep water exploration.
The state-run Oil and Natural Gas Corporation (ONGC) engaged BP Exploration (Alpha) in January 2025 as a technical service provider (TSP) to revive production in Mumbai High — India’s largest producing oil field — and BP Exploration Services India recently to do the same for western offshore oil and gas fields. Indications are that TSP implementation in Mumbai High has moderated the declining trajectory and stabilised oil production.
Courting Global Majors
Domestic production can be boosted through E&P in the various offshore basins like the Andamans, Kutch-Saurashtra, and Mahanadi, which can only happen with greater involvement from global oil majors. Chevron and TotalEnergies, for instance, have the latest technologies for deep-sea drilling that can operate at ultra-high pressures in the Gulf of Mexico to access previously unobtainable resources. The test of the new policy regime will be if global majors participate in the tenth and eleventh OALP rounds as they need assurance against any fiscal policy changes that deterred them in earlier drilling rounds.
Big oil must not be constrained by the challenging business environment including concerns regarding arbitration. High fiscal and regulatory burdens, including retrospective taxation, impacted Cairn Energy, which made the largest discovery of oil in Rajasthan in 2004.
The ruling dispensation is pushing domestic E&P more systematically by focusing on collecting seismic data in unexplored deep water and ultra-deep water oil and gas blocks. This must be welcomed as it addresses Big Oil’s concerns regarding the lack of adequate data on the offshore oil and gas blocks. E&P is highly challenging in the Andamans, for instance, as it lies along a complex tectonic arc and is active seismically. India must go all in to boost data-driven E&P rather than blind E&P. As this process remains serendipitous, we should not be deterred by cost overruns and huge write-offs for unsuccessful drilling. While Big Oil will make a huge difference, ONGC, for its part, is likely to spend $18-20 billion to hire deep water drilling rigs in an ambitious E&P drive to boost domestic energy production.